Schedule C Expense Categories: A Line-by-Line Guide (2026)

If you're self-employed and file a Schedule C (Form 1040), your business expenses go in Part II, Lines 8 through 27. The IRS gives each line a specific category, but the official instructions are surprisingly vague about what actually belongs where.

This guide fills that gap. For every expense line, we cover what the IRS says goes there, give you concrete transaction examples with real vendor names and dollar amounts, and flag the mistakes that trip people up most often.

One important note before we start: it does not matter whether these expenses come from a dedicated business bank account or your personal checking account. The IRS cares about proper documentation, not which account the money came from.

How to Use This Guide

This guide covers every expense line in Schedule C Part II. Each section includes:

• •What belongs on this line according to IRS instructions
• •Real transaction examples with vendor names and dollar amounts
• •What does NOT go here so you don't misfile
• •Categorization tips for tricky situations

If you know your expense and need to find the right line, use the table of contents on the right. If you're working through your bank statement line by line, just scroll through in order.

Line 8: Advertising

Deduct costs for advertising your business to potential customers. This includes any expense that promotes your business, your products, or your services to the public.

Tip: Your business website costs (hosting, domain name, design) generally go on Line 8 since the website's primary purpose is marketing. However, if you sell products directly through your website, you could argue it's an operating expense on Line 27a. Either approach is reasonable; just be consistent year to year.

Line 9: Car and Truck Expenses

Deduct the business portion of your vehicle expenses. You have two options: the standard mileage rate or actual expenses. You pick one method and use it for the life of the vehicle (with some exceptions).

Tip: You must also complete Part IV of Schedule C (vehicle information) and may need Form 4562 if claiming depreciation with the actual expenses method. For detailed tracking advice, see our mileage tracking guide.

Line 10: Commissions and Fees

Deduct commissions and fees paid to non-employees for sales or services. This typically covers payments tied to revenue generation: referral fees, sales commissions, and platform fees directly related to earning income.

Tip: The distinction between Line 10 and Line 11 matters. Commissions and fees (Line 10) are typically tied to sales and revenue. Contract labor (Line 11) is for operational work. A referral fee to someone who sent you a client goes on Line 10. Paying a freelancer to help you complete a project goes on Line 11.

Line 11: Contract Labor

Deduct amounts paid to independent contractors who performed services for your business. These are people who are not your employees but who you hired to do specific work.

Tip: If you pay any single contractor $600 or more during the year, you're required to file a Form 1099-NEC for them by January 31 of the following year. Keep records of each contractor's name, address, and total payment amount. For more on 1099 reporting, see our contractor tax deductions guide.

Line 12: Depletion

Depletion is a specialized deduction for businesses that extract natural resources (oil, gas, minerals, timber) from property they own or lease. If that doesn't describe your business, you can skip this line entirely.

Tip: Most freelancers, gig workers, and service-based businesses will never use Line 12. If you do extract natural resources, see IRS Publication 535 for the calculation methods (cost depletion vs. percentage depletion).

Line 13: Depreciation and Section 179 Expense Deduction

When you buy equipment, furniture, or other assets that last more than one year, you generally can't deduct the full cost in the year you buy them. Instead, you “depreciate” the cost over several years. However, Section 179 lets you deduct the full cost of qualifying assets in the first year, up to a limit ($1,250,000 for 2024; $1,250,000 for 2025).

Tip: You'll need to file Form 4562 to claim depreciation or Section 179. The item must be used at least 50% for business. If you use a laptop 80% for work and 20% for personal browsing, you can only depreciate 80% of the cost. Keep receipts and document the business-use percentage.

Line 14: Employee Benefit Programs

Deduct contributions you made to employee benefit programs that are not pension or profit-sharing plans (those go on Line 19). This covers accident and health plans, group-term life insurance, dependent care assistance, and similar benefits you provide to your employees.

Tip: Most solo self-employed people without employees will leave Line 14 blank. If you're a sole proprietor with no W-2 employees, your own health insurance deduction is taken on your personal return (Form 1040 Schedule 1), not here.

Line 15: Insurance (Other Than Health)

Deduct premiums for business insurance policies (other than health insurance, which is handled differently for self-employed individuals).

Tip: If you use the actual expenses method for your vehicle (Line 9), put the business portion of your auto insurance on Line 9, not Line 15. If you use the standard mileage rate, auto insurance is already baked into the per-mile rate.

Line 16a/16b: Interest

Deduct interest paid on business debts. The IRS splits this into two sub-lines: 16a for mortgage interest paid to financial institutions (where you received a Form 1098), and 16b for all other business interest.

Tip: If you use a personal credit card for business purchases, the purchases themselves are deductible on the appropriate lines, but the credit card interest is generally not deductible unless the card is used exclusively for business. Consider a dedicated business credit card if you carry a balance.

Line 17: Legal and Professional Services

Deduct fees paid to attorneys, accountants, tax preparers, bookkeepers, and other professionals for services related to your business.

Tip: If your tax preparer charges a flat fee for your entire return, only the portion attributable to your Schedule C is deductible here. Ask them to itemize the business portion separately on their invoice.

Line 18: Office Expense

Deduct the cost of office supplies, postage, and general office-related purchases consumed during the year. This is one of the broadest and most commonly used lines on Schedule C.

Tip: Software subscriptions like QuickBooks ($30/mo), Microsoft 365 ($12.99/mo), or Google Workspace ($7.20/mo) can go on Line 18 or Line 27a (Other Expenses). Many tax professionals put software on Line 27a with a “Software & Subscriptions” label in Part V for clearer record-keeping. Either approach works.

Line 19: Pension and Profit-Sharing Plans

Deduct contributions you made as an employer to pension, profit-sharing, or annuity plans for your employees, including SEP-IRA, SIMPLE IRA, and 401(k) plans.

Tip: This is another line that most solo self-employed people will skip. Your own retirement contributions (SEP-IRA, Solo 401(k)) get deducted on your personal return, not on Schedule C. Line 19 is only for contributions you make on behalf of your employees.

Line 20a/20b: Rent or Lease

Deduct rent or lease payments for property used in your business. The IRS splits this into two sub-lines: 20a for vehicles, machinery, and equipment, and 20b for other business property like office space or a studio.

Tip: If you lease a vehicle and use it for both business and personal purposes, only deduct the business portion. For example, if your car lease is $450/mo and you use the vehicle 70% for business, enter $315/mo on Line 20a. For coworking spaces, see our coworking space expense guide for more detail.

Line 21: Repairs and Maintenance

Deduct the cost of repairs and maintenance that keep your business property in good working condition. The key distinction: repairs maintain current condition, while improvements add value or extend the useful life (improvements must be depreciated instead).

Tip: The repair vs. improvement line can be blurry. Painting a room in your business space is a repair. Adding a new room is an improvement. Replacing a broken window is a repair. Upgrading all windows to double-pane is an improvement. When in doubt, a tax professional can help you determine the right classification.

Line 22: Supplies

Deduct the cost of materials and supplies consumed in the course of doing your work. These are items used up within a year that are not office supplies (which go on Line 18) and not inventory you resell (which goes in Part III).

Tip: Think of Line 22 as “stuff you use up doing the actual work.” A photographer uses memory cards and lens wipes (Line 22). A photographer also uses printer paper and envelopes to invoice clients (Line 18). The supplies line is profession-specific; the office expense line is universal.

Line 23: Taxes and Licenses

Deduct business-related taxes and licensing fees. This includes state and local taxes directly tied to your business operations, as well as professional licenses and permits required to do your work.

Tip: Many self-employed people forget to deduct their business license and professional license renewal fees. If your city or county requires a business license to operate, that annual fee is deductible here. Same for state-required professional certifications.

Line 24a: Travel

Deduct travel expenses when you travel away from your tax home overnight for business. “Tax home” is generally the city or area where your main place of business is located, not necessarily where you live.

Tip: The key test for Line 24a is overnight. If you drive two hours to meet a client and come home the same day, that's a mileage deduction (Line 9), not a travel deduction. If you stay overnight, the hotel, transportation, and incidental expenses go on Line 24a. Your meals during that trip go on Line 24b.

Line 24b: Deductible Meals

Deduct 50% of business meal expenses. This includes meals while traveling for business and meals with clients, customers, or business associates where business is discussed.

Tip: Enter the full cost of meals on Line 24b. The IRS instructions tell you to enter the total, and the 50% reduction is calculated automatically on Line 24b of the form. Always document who was present, the business purpose, and the date. For more detail, see our business meals deduction guide.

Line 25: Utilities

Deduct utility expenses for your business. This covers electricity, gas, water, phone, and internet used for your trade or business.

Tip: If you work from home and claim the home office deduction, your home utilities are calculated separately through Form 8829 (actual expenses method) or the simplified method ($5/sq ft, up to 300 sq ft). Don't double-count them on Line 25. Line 25 is for utilities at a separate business location or for the business portion of your phone plan. For more, see our internet deduction guide and phone bill categorization guide.

Line 26: Wages

Deduct total salaries and wages paid to W-2 employees during the tax year, minus any applicable employment credits. This line is only for employees, not independent contractors.

Tip: Most solo self-employed people will leave Line 26 blank. As a sole proprietor, you are not an employee of your own business. You take “owner's draws,” not wages. If you do have employees, the amount here should match Box 1 totals on the W-2 forms you issue.

Line 27a: Other Expenses (Part V)

This is the catch-all line for legitimate business expenses that don't fit neatly into Lines 8 through 26. You list each expense type and amount in Part V of Schedule C, total them on Line 48, and that total flows to Line 27a.

Tip: In Part V, group your expenses into descriptive categories (e.g., “Software & Subscriptions: $659.88”) rather than listing every individual purchase. This keeps your return clean and reduces the chance of questions. For more on software categorization, see our SaaS subscriptions guide. For professional development, see our professional development guide.

Quick-Reference: Common Expenses by Line

Here's a fast-lookup table for the most common self-employed expenses. Find your purchase and see which Schedule C line it belongs on.

The 7 Most Common Schedule C Categorization Mistakes

Expenses That Are NOT on Schedule C

Some common self-employed deductions are taken elsewhere on your tax return, not on Schedule C. Here are the most important ones: